Appraising homes with an automated tool is difficult; valuing domains that way is even harder.
A lot of domain investors are frustrated by automated appraisals. When someone wants to buy a domain name and quotes an automated appraisal, it’s usually less than what the investor wants for the domain.
I think automated appraisals can be helpful but I also understand this frustration.
Elliot Silver has a great take on how to respond. But you might also be able to compare it to another automated appraisal service that most people know about: Zillow.
Zillow assigns a value to houses, and it often doesn’t do a good job. When we sold our house in Austin, Zillow’s valuation was off by about $200,000.
Sure, on a percentage basis, it’s not as much as domain appraisals can be off. That’s because there’s a lot more data available to Zillow and comps are much, much easier to get for houses.
Yet homes are something people understand. And on anything other than cookie-cutter neighborhoods, Zillow seems to struggle mightily.
When it comes to home valuations, there’s Zillow’s automated valuation and then there’s a human valuation. The human appraiser that comes out to value a house in person for the bank is much more accurate than the automated one.
Depending on who you’re negotiating with, it might make sense to ask them how they feel about Zillow’s valuations. Are they accurate? You can then discuss how it’s much more difficult for an automated domain appraisal to get within the ballpark than it is for Zillow.